FTC: When It Comes to the TCPA and FDCPA, Everything Counts

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For an industry that relies so heavily on communication devices to reach their targets, debt collectors have been carefully watching how the Federal Trade Commission interprets and enforces laws relating to their business for decades.  Collection agencies and collection attorneys have been paying particular attention to the Federal Debt Collections Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA) because the language of both acts – the first written in 1977 and the latter amendment created in 1991 – predate many modern technologies, especially text messaging and ringless voicemail.

The FTC has no rulemaking authority, but frequently uses its enforcement authority to telegraph how it plans to interpret rules and regulations going forward.  Recently, the FTC brought the first case against a collection firm based in Glendale, California that involved the sending of text messages and found that the firm had violated the clear disclosure rule of the FDCPA when it used text messages that made no reference to debt and did not obtain prior permission from the consumer.  The company in question agreed to a $1 million settlement and to accept guidelines for future collection attempts.

The ruling was enlightening because the FTC chose its words very carefully to state that it does not matter where the transmission was targeted (i.e., a land-line phone or device).  In fact, the FTC underlined the issue in a post to its web site, writing ‘Regardless of the means you choose — mail, phone, text, or something else — the law applies across the board.’

Thus, the FTC’s policy going forward is relatively clear: There will be no tolerance for “loopholes” regarding text messages or so-called “ringless voicemail” messages that bypass a mobile phone’s ringer and allow direct recording to voicemail.  The FTC clearly intends to regard any communication without clear and prominent disclosure as a violation of the FDCPA and/or the TCPA.

How many debt collection firms meet or exceed the FTC's $10,000,000 revenue baseline for review?

Bang for the Buck: Efficiently Training and Motivating Collectors

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Debt collection, like any other business, has a skill set.  Not everyone is born with the proper skills and mindset that make an effective collection professional and even those who do have the right mix of mental and emotional attributes still require training.  Many collection agencies – especially smaller shops – struggle with staff turnover and the sense that they waste hundreds of hours and untold amounts of money and resources training collectors who then leave the industry shortly thereafter.

Typically, this sort of turnaround can be traced right back to the training the collectors are given.  Here are some simple suggestions to reduce staff turnover and make sure you’re getting the most ‘bang for your buck’ when it comes to training and motivating your collection staff.

·              Educate.  Training can’t simply consist of handing your new hire a stack of documents to read and sending them on their way.  An effective collector has to know the laws of your area and the policies and culture of your company.  Take the time to educate them.  It will pay dividends.

·              Foster Communication.  Collections can be a competitive field, and offering rewards for volume is always a good idea.  But you can’t allow your collectors to become solo agents, cut off from each other.  Weekly meetings where communication is encouraged are essential, as your collectors can learn from each other’s successes – and failures.

·              Keep Goals Realistic.  Setting goals for your collectors is a tried-and-true motivational tool, but you have to make these goals individual and realistic.  Tailor goals to the collector’s experience, prior record, and personality.  A little stretching is good, but a goal that is absolutely unreachable doesn’t motivate, it depresses.

·              Talk to Your Collectors.  Getting them to discuss business between themselves is good for education and shared experience, but you should make sure you touch base with your staff and make them feel valued, as well as to review their load and advise them on tactics and where they may be going wrong.

A motivated staff will clear more paper; it’s a simple fact of life.

Is it legal to send debtors a text message in an effort to collect on a debt?

FTC and CFPB Affecting Collections Large and Small

The recent change in focus and attitude on the part of the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) has brought an aggressive new strategy from the Federal Government against the tactics and business practices of collection agencies and related industries such as debt relief companies.  While the new rules and policies were welcomed by consumer advocates who have long complained that debt collection has been existing in a quasi-legal and certainly immoral space for some time, the new policies at first seemed to focus only on the larger firms that had revenues of $10,000,000 and up.  Many consumer advocates were unhappy with this baseline as it meant the vast majority of agencies would be excluded from review, as only 175 out of approximately 4,500 collection firms meet the revenue baseline.

However, in the months since the new rules went into effect, it’s become clear that this aggressive new policy will affect the smaller collection agencies that don’t meet the revenue baseline just as heavily.  This has been demonstrated in two ways, direct and indirect.

Directly, the FTC and CFPB have brought several complaints and suits against smaller agencies in Florida and California in recent months, seeking judgments for violations including charging fees for debt relief services and improperly withholding information from consumers.  Many of the firms targeted do not meet the revenue baseline.

Indirectly, the tightened rules and renewed focus have impacted the smaller collection shops and collection law firms by a trickle down affect. Hence, a large collection agency that is subject to the new rules will have to insure their subcontractors all meet the new stringent guidelines. Therefore, smaller collection firms are now impacted—therefore their bottom lines are being negatively affected as well.  Poorly documented or contested debts that were previously sold to smaller shops as well as larger firms are now being sold more or less solely to the largest debt firms in the country.  The result is that smaller collection agencies do not have access to a great deal of the existing collectible debt.  As a result, even without direct action from the Federal Government, the smallest debt collection shops are suffering a sizable reduction in business.